CTM18600 - Shadow ACT: computation of: company ceasing to be a member of a group

SI1999/358, Reg. 11 (7)

Where a company ceases to be a member of a group, shadow ACT is computed as if the part of the accounting period before it ceased to be a member and the part after were two separate accounting periods.

Example

Accounting Period 1.1.2005 – 31.12.2005.

Company makes a distribution of £8,000. It receives a dividend from a non-associated company which, with the tax credit, totals £32,000. It has surplus franked investment income (FII) brought forward of £20,000.

Accounting Period 1.1.2006 – 31.12.2006.

Company pays a dividend of £80,000. It receives a dividend from a non-associate, which with the tax credit totals £24,000.

Accounting Period 1.1.2005 – 31.12.2005, (calculation of surplus FII).

Surplus Fll brought forward £20,000

Fll £32,000 x 9/8 = £36,000

Total £56,000

Less
Distribution £8,000

+ Shadow ACT £2,000

Franked distribution £10,000 £10,000

Surplus Fll £46,000

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Accounting Period 1.1.2006 – 31.12.2006, (calculation of shadow ACT).

Distribution £80,000

Shadow ACT theron £20,000

Franked distribution £100,000

Fll £24,000 x 9/8 = £27,000

+ Surplus Fll £46,000 £73,000

Excess £27,000

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Shadow ACT is 25% of the amount which, when the shadow ACT is added to it, is equal tothe excess = £5,400.